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Economic Pulse: Sales of Existing Homes Retreat

Tuesday, January 26, 2010

U.S. sales of existing homes declined 16.7% in December, in line with expectations that reflected the effect of the original November deadline for the first-time homebuyer tax credit, the National Association of Realtors reported.

Existing-home sales in December fell to a seasonally adjusted annual rate of 5.45 million units, down from an annual rate of 6.54 million in November. December sales, however, were 15% above the annual rate of 4.74 million units in December 2008. The figures include single-family homes, townhomes, condominiums, and co-ops.

For 2009 as a whole, sales of existing homes rose 4.9%, to 5.156 million units, from the 2008 figure of 4.913 million. The gain was the first annual increase since 2005.

Single-family home sales fell 16.8% to a seasonally adjusted annual rate of 4.79 million in December from November, but were 12.7% above December 2008. For all of 2009, single-family sales rose 5%, to 4.566 million.

Existing condominium and co-op sales fell 15.4%, to a seasonally adjusted annual rate of 660,000 in December from November, but were 34.7% higher than the pace of December 2008. For all of 2009, condo sales rose 4.8%, to 590,000 units.

Lawrence Yun, chief economist for the association, said the figures yielded no surprises. "It's significant that home sales remain above year-ago levels, but the market is going through a period of swings driven by the tax credit," he said. "We'll likely have another surge in the spring as home buyers take advantage of the extended and expanded tax credit. By early summer the overall market should benefit from more balanced inventory, and sales are on track to rise again in 2010."

Yun added, however, that "the job market remains a concern and could dampen the housing recovery. Job creation is key to a continued recovery in the second half of the year."

Regionally, existing-home sales in December declined from the previous month by 19.5% in the Northeast, 25.8% in the Midwest, 16.3% in the South, and 4.8% in the West. Compared to December 2008, however, existing home sales were higher in December in all regions-by 21.3% in the Northeast, 8.5% in the Midwest, 15.5% in the South, and 15% in the West.

The Realtors association said total housing inventory at the end of December fell 6.6%, to 3.29 million existing homes available for sale, which represents a 7.2-month supply at the current sales pace, up from a 6.5-month supply in November. Raw unsold inventory is 11.1% below a year ago, is at the lowest level since March 2006, and is 28.2% below the record of 4.58 million in July 2008.